Medical Office Investments Surge 122% in Q4

Investor interest in medical outpatient buildings accelerated at the end of 2025, making the asset class one of the year's strongest performers. According to CBRE, investment volume in the fourth quarter surged 122% from the previous quarter to $6.1 billion—driven in large part by the $2 billion sale of three tranches from Welltower's 18 million-square-foot portfolio to Remedy Medical Properties.

For the full year, total medical office investment reached $12.6 billion, up 35% from 2024. That marks the highest annual total since 2022 and stands 79% above the five-year fourth-quarter average of $3.4 billion.

Pricing followed a more modest upward trend. The average sale price for medical office buildings rose $2 per square foot quarter-over-quarter, a 0.7% increase to $300 per square foot. Traditional office assets, by comparison, saw values slip 2.5% to $192 per square foot. Even with the improvement, average medical office pricing remains below its Q3 2022 peak of $374 per square foot.

Cap rates also edged upward. CBRE reported that the average medical office cap rate increased 9 basis points from the previous quarter and 7 basis points from a year earlier to reach 7.1%. That compares with 7.8% for traditional office properties, which rose 28 basis points year-over-year but remained flat from the prior quarter.

Regionally, the Southeast led the nation in fourth-quarter medical office investment volume at $1.62 billion, followed by the Southwest with $1.16 billion and the West with $1.11 billion. The Midwest ranked close behind at $1.05 billion, while the Mid-Atlantic and Northeast regions trailed with $609 million and $532.6 million respectively.

When measured by square footage, the Midwest edged out the Southeast, delivering 4.3 million square feet of transactions compared with 4.2 million in the Southeast and 3.4 million in the Southwest. Average sale prices per square foot were highest in the Southeast at $389, followed by the West at $346 and the Southwest at $343. The Northeast averaged $331, the Mid-Atlantic $284, and the Midwest $245.

Across the top 20 U.S. markets, Washington, D.C. led investment activity for the trailing four quarters ending in Q4 2025 with $536 million, followed by South Florida ($511.6 million), Phoenix ($467.6 million), and Chicago ($365.7 million). Other major markets included Dallas, Richmond, Los Angeles, and Las Vegas, each exceeding $300 million in volume.

CBRE also tracked shifts in lending composition across property types. Alternative lenders accounted for 40% of loan volume in Q4 2025, up from 23% a year earlier. Banks' share declined to 35% from 43%, while life companies dropped to 19% from 33%. CMBS lending, though still a small slice, rose to 7% from just 1% the prior year.